Full Year Results. 17 November 2009

Transcription

1 Full Year Results 17 November

2 Introduction Andy Harrison Chief Executive Officer 2

3 Europe s best performing airline Results in line with expectations Reduction in pre tax profit driven by: Increase in unit fuel cost; 86.1m largely driven by movement in dollar Reduction in interest income of 30.5m Underlying margin improvement Good revenue performance; +4.1% per seat at constant currency Operating cost* per seat ex fuel; +3.9% per seat at constant currency * Excludes interest income 3

4 easyjet has strengthened Share gains in valuable markets easyjet passengers up 3.4%; compared to c.5% reduction in total European short haul seat capacity Increased easyjet presence on the top 100 routes Gaining market share in valuable markets Focused investment in London Gatwick, Paris, Milan and Madrid Over 10% increase in easyjet capacity at slot constrained airports Progress on cost initiatives Exited 19 expensive aircraft from the fleet in the year Systems implemented; crew planning, LIDO, EPOS Leveraging scale in a recession e.g. new 11 year contract agreed with SRT saving of 175m over life-time of contract Financial position improved Cash and money market deposits exceed 1bn reflecting strong cash flow from operations Substantial resources to fund aircraft deliveries 4

5 Finance review Mark Adams Chief Financial Officer 5

6 Financial results m F 09 F 08 Change Total revenue 2,667 2, % Fuel (807) (709) +13.9% Operating costs excluding fuel* (1,635) (1,392) +17.5% EBITDAR* % Finance and ownership* (181) (139) +31.0% Pre-tax profit (underlying) % Margin* 1.6% 5.2% -3.6pp Fuel cost per seat Pre-tax profit per seat * Margins impacted by 86.1m increase in unit fuel costs due to 11% increase in effective fuel price to 536 per tonne * Underlying number; finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and operating costs exclude 12.9m of one-off integration costs for GB Airways in

7 Net income, EPS, ROE m F 09 F 08 Change Pre-tax profit (underlying) * % One-off integration costs - (13) - Profit on sale of aircraft Pre-tax profit (reported) % Tax credit / (expense) 16 (27) % Profit after tax % Earnings per share (basic reported) 16.9p 19.8p -14.6% ROE (reported) 5.5% 6.8% -1.3ppt Favourable resolution was reached with HMRC on a prior year tax matter resulting in the release of a provision Effective tax credit is 30% for F 09, planned effective tax rate for F 10 is 25% Fleet profile ensures cash tax rate continues to be single digits over the medium term * Underlying number; finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and operating costs exclude 12.9m of one-off integration costs for GB Airways in

8 Despite recession, H2 PBT per seat maintained m H2 09 H2 08 Change Total revenue 1,634 1, % Fuel (451) (445) +1.3% Operating costs (917) (775) +18.3% EBITDAR* % Finance and ownership (92) (80) +16.9% Pre-tax profit* % Fuel cost per seat % Pre-tax profit per seat* % Good revenue performance in a recessionary environment Positive impact from movement of Easter from Q2 08 to Q3 09 Progress in maintenance and ownership costs offset by reduction in interest income * Underlying number; finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and operating costs exclude 12.9m of one-off integration costs for GB Airways in

9 Currency impact Currency split - total revenues Currency split - total costs other 3% euro 42% US dollar 41% euro 31% sterling 49% swiss franc 4% swiss franc 6% 6% other 1% sterling 23% Effective rates: dollar - F v F ; euro F v F F 09 F 08 Change Total revenue per seat (rps) % at constant currency % RASK at constant currency % Total cost per seat ex fuel* % at constant currency* % CASK ex fuel at constant currency* % * Underlying number; finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and operating costs exclude 12.9m of one-off integration costs for GB Airways in

10 Profit per seat build up Profit per seat FX Impact Total Revenue Operating cost ex fuel Interest Income Fuel * 2009 Profit before tax Positive underlying margin development * Includes impact of dollar 10

11 Growth in total revenue per seat F 09 F 08 Change Passengers (m) % Load factor (%) ppt Seats (m) % Sector length (km) 1,101 1, % Total revenue ( m) 2,667 2, % Total revenue per seat constant currency % Revenue performance drive by strength of easyjet network and competitive fares 11

12 Passenger and ancillary revenues F 09 F 08 Change Passenger revenue ( m) 2,151 1, % per seat % Ancillary revenue incl. checked bag ( m) % per seat % Ancillary rev excl. checked bag per seat % Checked bag per seat % Change in ancillary revenue per seat vs 2008 Baggage / sporting goods +53.3% Speedy boarding and other discretionary charges +43.0% Card / change fees +31.0% Partner revenues +15.4% In-flight net revenue -5.9% 12

13 Cost per seat excluding fuel Cost ex fuel per seat * FX Impact Utilisation Interest income Sector length Airport mix Underlying cost increase 2009 Cost ex fuel per seat * Change in airport mix and sector length has delivered margin benefit * Underlying number; finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and operating costs exclude 12.9m of one-off integration costs for GB Airways in

14 Cost per seat - key drivers at constant currency change Airports / handling +7.4% Crew +8.7% Navigation +1.5% Overhead & other costs +2.0% Ownership +19.4% Maintenance -4.1% Total (ex fuel) * +6.2% drivers Airport price increases circa 30m, partially offset by 10m savings Increased winter disruption 4m Continued mix shift to primary airports Planned reduced aircraft utilisation over the Winter Boeing to Airbus conversion Previously negotiated pay award Continued mix shift as we grow in Europe Euro control price increase Boeing spares cost optimisation project benefit - 8m Lower winter utilisation Majority of increase due to fall of 30.5m in interest receivable Gross ownership costs improved by 3.5% as leased Boeing aircraft leave the fleet Lower winter utilisation Savings as leased Boeing aircraft leave the fleet * Underlying number; finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and operating costs exclude 12.9m of one-off integration costs for GB Airways in

15 Fuel and currency impact on FY results F 09 F 08 Difference Fuel $ / tonne * market rate 595 1,070 (475) effective price US dollar rate market rate (43) cents effective price (18) cents Actual cost of fuel / tonne / tonne is equivalent to 86.1m or 1.63 per seat increase v F 08 *Price which excludes taxes, fees and levies 15

16 Fuel hedging position and sensitivities 66% of anticipated Jet requirement for the full year to 30 September 2010 hedged using forwards at $750/MT 22% of anticipated Jet requirement for the full year to 30 September 2011 hedged using forwards at $722/MT $10 movement in fuel price per metric tonne will impact full year fuel bill by c.$5.1m At current rates the combination of fuel and currency gives an around 100m benefit in F 10 v F 09 16

17 Currency hedging position and sensitivities Dollar 51% of anticipated US$ requirement for the full year to 30 September 2010 hedged using forwards at $ % of anticipated US$ requirement for the full year to 30 September 2011 hedged using forwards at $1.62 1$ cent movement in dollar will impact full year fuel profit by 2.6m Euro 80% of anticipated EURO surplus for the full year to 30 September 2010 hedged using forwards at % of anticipated EURO surplus for the full year to 30 September 2011 hedged using forwards at

18 Cash Sept '09 * Improved cash position m m ( 508m) m 60m 61m ( 10m) m* m 1,075m* 18 Cash Sep '08* Operating profit Depn & amort. Net working capital Tax, net int. fx & other Financing Capex Aircraft sales * Includes money market deposits but excludes restricted cash

19 Strong balance sheet m Sept 09 Sept 08 Fixed assets 1,612 1,103 Cash and money market deposits 1, Goodwill and other intangible assets Other assets Total assets 3,673 3,101 Debt 1, Other liabilities 1,245 1,196 Shareholders funds 1,307 1,278 Total equity and liabilities 3,673 3,101 Gearing* 38% 29% *Gearing defined as (debt + 7 x annual lease payments cash including restricted cash) divided by (shareholders funds + debt +7 x annual lease payments cash including restricted cash) 19

20 Net increase of 16 aircraft in the fleet Sept 09 Sept 08 Change B (operating lease) (12) A319 (operating lease) A319 (finance lease) A319 (owned) A320 (owned) GB Airways A320 (operating lease) 5 9 (4) GB A321 (owned) 4 7 (3) 9 16 (7) Total fleet Owned or finance lease 62% 49% 13pp Operating lease 38% 51% (13)pp 4 x A321 aircraft held for sale expected to exit by September 2010, no write-off anticipated (at current exchange rates) 20

21 Aircraft deliveries financed for next 18 months F 10 F 11 F 12 Net capital expenditure * $545m $500m $500m Deliveries Exits Net increase in fleet size ** Operating cash flow generation Cash and money market deposits of 1,075m Existing financing (<100bp s above LIBOR) broadly spread amongst counterparties 2006 standby facility $250m December 2007 un-drawn facilities $278m No MAC or financial covenants Facilities available until F 11 Sale and lease back for 6 x A320 agreed post year end Proceeds from sale of aircraft Flexibility of 25 cash purchased aircraft owned outright ** Assumes 70% financing on balance sheet **Assumed 4 aircraft for sale exit fleet by September

22 Business review Andy Harrison Chief Executive Officer 22

23 Focus on all the drivers of margin improvement Yield Focused asset allocation to build Europe s No.1 Air Transport Network Route performance management Improved yield management Ancillary Revenues Indirect pricing Value added goods and services Cost Systems implementation to drive efficiency Leverage scale and recession to deliver procurement efficiencies Efficient fleet management Targeting a 15% return on equity 23

24 Growth in capacity and unit revenues Carefully targeted seat growth of c. 20%, 2007 to 2009 with improved total revenue per seat (at constant currency) Growth in TRPS Indexed to Quarterly growth in seats flown from Q Easter Easter Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4' Change in Total Revenue per Seat Growth in seats flown 24

25 easyjet s relative performance has improved Reported profit before tax per seat ex fuel for the six month period to: easyjet Ryanair Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Source: Credit Suisse 25

26 Network drives resilience Broad appeal across geographies and customer types ensures balanced revenue base Convenient airports attractive to time sensitive consumers Ruthless focus on schedule quality easyjet business bookings increased in a declining market Increasingly geographically diverse U.K. Mainland Europe 58% 55% 42% 45% 50% 50% Increasing proportion of passengers originate outside the UK 26

27 Network - well positioned for economic recovery Breadth and depth of network Leading presence on Europe s top 100 routes 422 routes, 114 airports and 20 bases Nearly 300million consumer live within a one hour drive of an easyjet airport Strong, defendable positions London Gatwick No.1 Milan Malpensa No.1 Geneva No.1 Paris No.2 Berlin Schönefeld No.1 Building Presence on top 100 routes (market pairs) easyjet Ryanair BA Lufthansa-Swiss AF-KLM Alitalia 1 19 Iberia Source: OAG 12 months to Sep09, OAG market definitions Primary airport = airport over 10 mppa or largest airport in market Non primary airports Number of market pairs operated between 2 primary airports Air Berlin -2-5 SAS Vueling 27

28 Asset allocation targeted Winter growth Rest of UK -2% France +18% Gatwick +14% Italy +36% Spain +23% Winter 2010 easyjet capacity up 10% Competitor capacity down low single digits Mainland Europe +17% Capacity growth by market refers to Q1 F 10 28

29 Continuous improvement in network quality Winter 2010 Continued improvement in business timings and increased frequencies 26 new routes added Expanding presence in Germany (DUS, MUC, HAM) Further growth in Rome (5 new routes) Building network connectivity to Scandinavia (CPH) New country added: Israel (TLV) Network redeployment for profit optimisation e.g. consultation on future of Luton and East Midlands Taking advantage of competitors retreat Slots at congested airports to increase by 15% Ensures strong defensible positions once economy improves 60% 50% 40% 30% 20% 10% 0% <9:00AM 9:00-15:59 >16:00PM S08 S09 W08 W09 Copenhagen expansion 29

30 Further potential for ancillary growth Opportunities Increased Speedy Boarding penetration In-flight spend per head improving Improvements to easyjet.com to drive partner revenue conversion Limited, selective increases in indirect pricing Hotel and car hire currently impacted by macro factors Aug fresh and hot food spend per head YOY Hot food SPH Hot food SPH Fresh food SPH Fresh food SPH Aug- 08 Aug- 09

31 Delivering cost savings Additional 65m of cost reduction identified Original target p.a. by F 11 Increased target p.a. by F 12 Ownership - exit expensive aircraft from fleet 40m 30m Maintenance - in-sourcing, SRT deal & further contract renegotiation, efficiency projects 8m 35m Overheads - leverage scale 6m 10m Airports & Handling handing & volume deals, check-in process improvement, some self handling & low cost terminals Crew productivity & flexibility initiatives, Boeing exit (no requirement to ring fence crew), new rostering systems Fuel GPU usage, flight planning, fuel reporting and pilot technique 9m 30m 30m 20m Total 125m 190m 60m 35m Delivers a net benefit to the bottom line of 1 per seat by end F 12

32 Best in class engineering costs 11 year deal, with 5 years break clause Global tender process for airframe maintenance - SR Technics selected Contract value $1.6bn over 11 years Cost savings of around 175m over the life of the contract Safety our No.1 priority New low cost maintenance base in Malta Production line optimisation Use of better logistics systems 32

33 Efficient fleet management 30 Sept Sept Sept Sept 2012 A A A320 GB spec A321 GB spec B Total Flexible fleet plan Anticipated average annual growth rate of 7.5% per annum Fleet plan can be adjusted in the light of market opportunities and economic conditions A320 s configured with 180 seats Increased available capacity at slot constrained airports at peak times Cost per seat 6% lower vs A319 Exited 19 expensive aircraft in the past year 1 includes 4 aircraft held for sale (4 x A320) which will exit the fleet by

34 Trading in line with expectations % seats sold * F'10 F'08 F'09 F10 F09 F08 0 October November December January February March First half bookings broadly in-line with prior year Over 45% of available Winter seats now sold Winter total revenue per seat expected to be down a few percentage points *as at

35 Outlook easyjet s pre tax result in 2010 at current fuel prices and exchange rates will benefit by around 100 million from lower fuel prices as higher price fuel hedges roll off, slightly offset by a strengthening US dollar. Capacity, measured in seats flown, for both the first half and the full year is expected to increase compared to the prior year by around 10% as easyjet continues with its strategy of carefully targeting growth. The current expectation is that competitor capacity on easyjet routes will be down by low single digits. Naturally, the impact of unemployment is expected to lead to some yield deterioration over the winter. With over 40% of the available first half seats now booked, total revenue per seat at constant currency in the first half of the year is expected to decline by a few percentage points compared to the prior year. Total operating costs* per seat excluding fuel at constant currency are expected to be broadly flat for the full year and up low single digits in the first half of the year compared to the prior period. Improvements in maintenance, crew and overhead costs will offset the mix impact of our continued growth in primary airports. We expect a reduction in interest income of around 10 million compared to the prior year due to continued lower interest rates, which will mainly impact the first half pre tax result. We see a tough winter ahead. We are focusing our efforts on further cost savings and efficiency programmes, together with optimising route profitability and aircraft allocation. We shall also benefit as our fuel hedges adjust to market prices. Putting all this together, at current fuel prices and currency rates, we expect easyjet to make substantial profit improvement during * Excludes interest income 35

36 Summary easyjet has traded well through a recession Economic environment continues to be tough easyjet strongly positioned Europe s No.1 air transport network Strong, focused organisation to deliver cost savings Financially resilient Medium term - focused growth with margin improvement Grow share of European short-haul market from 6.5% to 10% Return on Equity target of 15% Net cash generation post Boeing replacement programme 36

37 Questions and answers 37

38 Disclaimer This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of investment professionals in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order Persons within the United Kingdom who receive this communication (other than those falling within (i) and (ii) above) should not rely on or act upon the contents of this communication. Nothing in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion contained in the Financial Services and Markets Act This presentation has been furnished to you solely for information and may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any other purpose. This presentation does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of easyjet plc ( easyjet ) in any jurisdiction nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not constitute a recommendation regarding the securities of easyjet. Without limitation to the foregoing, these materials do not constitute an offer of securities for sale in the United States. Securities may not be offered or sold into the United States absent registration under the US Securities Act of 1933 or an exemption there from. easyjet has not verified any of the information set out in this presentation. Without prejudice to the foregoing, neither easyjet nor its associates nor any officer, director, employee or representative of any of them accepts any liability whatsoever for any loss however arising, directly or indirectly, from any reliance on this presentation or its contents. This presentation is not being issued, and is not for distribution in, the United States (with certain limited exceptions in accordance with the US Securities Act of 1933) or in any jurisdiction where such distribution is unlawful and is not for distribution to publications with a general circulation in the United States. By attending or reading this presentation you agree to be bound by the foregoing limitations.

39 Financial appendices 39

40 Cost per seat analysis per seat Change vs F 08 F 09 Reported Constant currency Airports / handling % +7.4% Crew % +8.7% Navigation % +1.5% Overhead & other costs % +2.0% Ownership % +19.4% Maintenance % -4.1% Total (ex fuel)* % +6.2% Total (ex fuel) per ASK (pence)* % +3.5% * Underlying number; operating costs finance and ownership excludes a 11.0m profit on the disposal of 3 aircraft in 2009 and excluding fuel exclude 12.9m of one-off integration costs for GB Airways in

41 Key measures per ASK pence F 09 F 08 Change Reported Constant currency Total revenue % +1.4% Fuel % -1.6% Costs ex fuel* % +3.5% Underlying profit % -7.3% Average sector length (km) 1,101 1, % 41

42 easyjet vs. Ryanair reconciliation Adj. PBT / seat (ex fuel) Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Profit / (Loss) before tax ( m) (17.1) (57.5) (116.5) Adjustments: Fuel ( m) GB Airways integration costs ( m) Profit on sale and dispossal of assets ( m) (13.3) 2.3 Reversal of impairment loses on financial assets ( m) (10.6) Adjusted PBT (ex fuel) ( m) Seats capacity (in million seats) Adj. PBT / seat (ex fuel) (in ) Adj. PBT / seat (ex fuel) Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Profit / (Loss) before tax ( m) (20.6) (311.4) Adjustments: Fuel and oil ( m) Loss on impairment of available-for-sale fin. asset ( m) Gain on disposal of PP&E ( m) (0.1) (12.2) (0.2) 0.2 (2.9) Adjusted PBT (ex fuel) ( m) , Exchange rate ( / ) (1) Adjusted PBT (ex fuel) ( m) Seats capacity (in million seats) (2) Adj. PBT / seat (ex fuel) (in ) Note: Ryanair figures are calendarised to 30 Sep year end. (1): Averege exchange rate over the period as per FactSet. (2): Calculated as Revenue Passengers Booked / Booked Passenger Load Factor.